Capital constraints put pressure on lending
In the past few years, capital constraints have become much more pressing for
the banking sector and, in turn, banks’ clients. Hence, the potential benefits of
securitisation have increased. Trends show a the link between a tighter capital
position and credit intermediation by banks.
During the financial and sovereign
crises, credit standards for loans to both large enterprises and SMEs were
tightened significantly due to the (constrained) capital position of European
banks. No additional tightening has been observed in recent years, but neither
has a significant easing. Credit standards are probably still quite tight due to
capital constraints and are far from “normal”.
Indeed, the ECB’s bank lending
survey defines changes only compared to the previous quarter, and not at an
absolute level. All in all, European banks’ capital constraints may still put a
brake on lending to non-financial corporations as well as households.